Nasdaq 100 and S&P 500 Forecast: Volatility Rises as Geopolitical Tensions Mount

Wall Street Slumps as Middle East Tensions Rise and Labor Data Reviewed

Wall Street indexes fell sharply on Tuesday as investors grew increasingly risk-averse amid escalating tensions in the Middle East. The stock market had shown resilience following a strong quarter, but geopolitical concerns derailed momentum. Adding to investor caution was the release of new labor data, which provided insights into the U.S. job market’s stability.

The selling pressure hitting the market late Tuesday indicates a shift in sentiment. This puts a pivot at 5642.50 and the 50-day moving average at 5616.47 on the radar as our next downside targets.

Geopolitical Tensions Drive Volatility

The S&P 500, Dow Jones, and Nasdaq all traded lower after reports surfaced about potential Iranian missile strikes against Israel. A senior White House official indicated that Iran may be preparing an attack, which quickly rattled the markets. The S&P 500 dropped to a near one-week low, reflecting the heightened uncertainty. Meanwhile, the CBOE Volatility Index (VIX), commonly referred to as Wall Street’s “fear gauge,” surged above 20, signaling a significant rise in investor anxiety.

Energy prices reacted swiftly, with West Texas Intermediate (WTI) crude oil jumping nearly 4% in response to the news. Crude oil prices tend to spike when geopolitical risks threaten major oil-producing regions, and this latest Middle East development has traders bracing for potential supply disruptions.

Labor Market Data Remains Steady

The U.S. labor market showed signs of strength as the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) reported 8.04 million job openings for August, exceeding expectations of 7.66 million. This stronger-than-anticipated data reflects continued demand for labor, providing some reassurance amid broader market concerns. However, the Institute for Supply Management’s (ISM) manufacturing index stood at 47.2 for September, just shy of expectations and signaling ongoing contraction in the manufacturing sector.

Energy Sector Outperforms Amid Oil Spike

The energy sector was a bright spot in Tuesday’s trading, gaining 1.6% as oil prices surged. Leading the charge were stocks like APA Corp., Marathon Oil, and Halliburton, each climbing over 2%. The jump in oil prices created an opportunity for energy stocks to outperform while the rest of the market struggled with broad-based declines.

In contrast, the technology sector bore the brunt of the sell-off, with the Technology Select Sector SPDR Fund (XLK) dropping 2.4%. Major tech names such as Apple, Nvidia, and Tesla each saw declines of over 3%, dragging the Nasdaq down further than other indexes.

Defense Stocks and Commodities React

Defense-related stocks gained as reports of an imminent Iranian missile strike surfaced. Northrop Grumman, Lockheed Martin, and RTX Corp. all rallied by 2% or more as traders anticipated increased demand for military hardware. Meanwhile, cruise line stocks, including Carnival and Royal Caribbean, fell sharply on fears that global unrest could disrupt travel.

Commodities saw notable movement as gold prices rose 1%, benefiting from its status as a safe-haven asset during periods of uncertainty. SPDR Gold Shares, an exchange-traded fund tracking the metal, followed suit, gaining 1%.

Market Forecast: Bearish Short-Term Outlook

With the Middle East situation evolving and risk aversion climbing, the short-term outlook for the market appears bearish. Traders are expected to remain cautious, with volatility likely to persist as geopolitical tensions and fluctuating oil prices continue to weigh on sentiment. Additionally, while labor data points to a stable job market, concerns over a slowing global economy and persistent inflation add to the uncertainty, making defensive sectors and commodities attractive in the near term.